The IOS Yard Where the Broker Yield Falls Apart

An industrial outdoor storage yard came across the desk at what looked like a strong going-in land yield — comfortably into the range that makes IOS investors lean in. The broker's math was simple: total rent over purchase price. The real math was not that simple, and three adjustments moved the number a lot.

First, usable versus gross acres. The site was sold as a 6-acre parcel, but only about 4 acres were actually stabilized, fenced, and leasable — the rest was unusable slope and setback. Rent is earned on the usable dirt, but the broker's yield was implicitly spreading income across all six acres of basis. Underwrite the income against the acres that actually produce it, and the picture tightens.

Second, the carry. This was not a clean NNN situation. The landlord was responsible for periodic regrading and drainage, fence and surface maintenance, and a portion of the taxes. Net those reserves out of the gross rent and you move from a broker yield to a true yield — and on a low-coverage yard those carry items are not rounding errors.

Third, income durability. A meaningful slice of the "rent" came from a month-to-month parking tenant with no term and no guarantee. That income is real today and gone on thirty days' notice, so it deserves a haircut, not face value, when you're capitalizing it into a price.

Stack the three adjustments — income on usable acres only, net of the carry, weighted for tenancy quality — and the true land yield landed well below the headline the broker led with. The deal wasn't necessarily bad; it was just priced on the rosiest possible reading of the income.

The lesson: on IOS, the broker yield and the true yield diverge for structural reasons, and all three drivers point the same direction. Separate usable from gross acres before you compute rent per acre. Net the carry you actually shoulder before you call it yield. And weight the income by how durable each rent stream really is. The dirt is the asset, but the yield is only as honest as the inputs you feed it.

Pressure-test it in the IOS land yield calculator. For the asset class top to bottom, see the IOS investor's guide and the covered-land play entry.